Finance Circular
No. 2013/01
Grants, Procurements and other Financial
Arrangements
Key points
This circular:
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provides guidance to Financial Management and Accountability Act 1997 (FMA Act)
agencies on how to distinguish between grants, procurements and other financial
arrangements
is relevant for chief executives and agency staff responsible for financial arrangements
reflects the 2013 update to the Commonwealth Grants Guidelines (CGGs)
reflects changes to the definition of a ‘grant’
replaces Finance Circular 2009/03 Grants and other common financial arrangements
is available at http://www.finance.gov.au/publications/finance-circulars/index.html.
Contents
Foreword...................................................................................................................................................... 2
Key concepts ............................................................................................................................................... 3
Part 1 – Grants, Procurements and other Financial Arrangements ....................................... 5
1.1
Introduction................................................................................................................................................ 5
1.2
Grants ............................................................................................................................................................ 5
1.2.1
Arrangements not considered to be grants ................................................................................... 6
1.3
Procurement ............................................................................................................................................... 7
1.3.1
Arrangements not considered to be procurements ................................................................... 7
1.4
Other financial arrangements ............................................................................................................. 8
1.4.1
Act of grace payments ............................................................................................................................ 8
1.4.2
Compensation payments ....................................................................................................................... 8
1.4.3
A payment to a person of a benefit or entitlement established by legislation ................ 8
1.4.4
Tax concessions or offsets .................................................................................................................... 8
1.4.5
Investments ................................................................................................................................................ 8
1.4.6
Loans.............................................................................................................................................................. 8
1.4.7
Gifts of public property .......................................................................................................................... 9
Part 2 - Frequently asked questions ................................................................................................ 10
Attachment A
FMA Regulation 3A ........................................................................................................... 13
Attachment B
Financial Arrangements Matrix ................................................................................... 14
Attachment C
Decision Tree for Financial Arrangements.............................................................. 17
Finance Circular 2013/01
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Department of Finance and Deregulation
Foreword
Foreword
This circular provides guidance for agency staff on how to distinguish between grants,
procurements and other common types of financial arrangements.
This circular reflects changes to the CGGs, which come into effect on 1 June 2013. Key changes
include:
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the need to determine the legal authority for the grant
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amendments to the definition of a “grant” provided in Regulation 3A(1)of the Financial
Management and Accountability Regulations 1997 (FMA Regulations)
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amendments to FMA Regulation 3A(2) which provides information on the types of
financial arrangements that are taken not to be grants.
An excerpt of FMA Regulation 3A is provided at Attachment A.
Following the High Court decision in Williams v Commonwealth (2012), chief executives or
agency staff need to determine whether there is a legal authority for the relevant arrangement.
Agency staff should consult their agency chief financial officer unit and internal legal areas in
making this determination. Agency staff should be aware that other changes have been made to
the CGGs stemming from the outcome of the High Court decision.
This circular is provided in two parts. Part 1 provides guidance for agency staff on how to
distinguish between grants, procurements and other common types of financial arrangements.
Part 2 contains frequently asked questions.
Also attached are two tools for agency staff: Attachment B provides a table summarising of the
information contained in this circular; Attachment C contains a decision tree to assist agency
staff to determine which type of financial arrangement they are using.
For questions relating to this finance circular, please contact the Grants Policy Team at
grants@finance.gov.au.
Kerry Markoulli
Assistant Secretary
Resource Management Branch
Governance and Resource Management Group
May 2013
Finance Circular 2013/01
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Department of Finance and Deregulation
Key concepts
Key concepts
agency means a Department of State, (including persons allocated to the department by the
FMA Regulations), a Parliamentary Department, or any agency prescribed under the FMA
Regulations (see section 5 of the FMA Act).
agency staff means officials of the agency. This includes persons who are not employed by the
agency but perform a ‘financial task’ for the agency. A ‘financial task’ is defined in
FMA Regulation 3 as a task or procedure relating to the commitment, spending, management or
control of public money.
authority means the legal authority (where express or implied) to exercise a power or function
that can be given directly through legislation (e.g. chief executives’ powers under section 32B
and section 44 of the FMA Act or other specific legislation) or through a delegation or
authorisation.
Commonwealth Grant Guidelines (CGGs) are issued by the Minister for Finance and
Deregulation (Finance Minister) under section 64 of the FMA Act and FMA Regulation 7A.
The CGGs establish the overarching Commonwealth grants policy framework within which
agencies develop their own specific grants administration practices. They also articulate the
expectations for all FMA Act agencies in relation to grants administration. The CGGs split into
two parts. Part 1 contains the mandatory requirements. Part 2 contains information on the
seven principles of grants administration.
Commonwealth Procurement Rules (CPRs) are issued by the Finance Minister under
section 64 of the FMA Act and FMA Regulation 7. The CPRs establish the Government’s policy
framework under which agencies govern and undertake their own procurement. The CPRs set
down the rules for Australian Government procurement and articulate the requirements for
agency staff performing duties in relation to procurement. The CPRs have two divisions.
Division 1 rules apply to all procurements regardless of their value or whether an exemption
applies to them. Division 2 rules apply to procurements valued at or above the relevant
procurement threshold.
ordinary services and functions of government means spending related to the running costs
of an agency, such as the payment of staff salaries or building rental. Generally, payments
relating to the ordinary services and functions of government will come from departmental
appropriations, however there can be situations where they are paid from administered
appropriations. Similarly, some payments from departmental appropriations may cover
matters that are not ordinary services and functions of government, and thus the arrangement
needs to be authorised by Schedule 1AA of the FMA Regulations or specific legislation.
proper use means efficient, effective, economical and ethical use that is not inconsistent with
the policies of the Commonwealth (see section 44 of the FMA Act).
public money means
a) money in the custody or under control of the Commonwealth; or
b) money in the custody or under control of any person acting for or on behalf of the
Commonwealth in respect of the custody or control of the money;
including such money that is held on trust for, or otherwise for the benefit of, a person other
than the Commonwealth (see section 5 of the FMA Act).
Finance Circular 2013/01
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Department of Finance and Deregulation
Key concepts
public property means
a) property in the custody or under control of the Commonwealth; or
b) property in the custody or under control of any person acting for or on behalf of the
Commonwealth in respect of the custody or control of the property;
including such property that is held on trust for, or otherwise for the benefit of, a person other
than the Commonwealth (see section 5 of the FMA Act).
Finance Circular 2013/01
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Department of Finance and Deregulation
Part 1 – Grants, Procurements and other Financial Arrangements
Part 1 – Grants, Procurements and other Financial
Arrangements
1.1 Introduction
1.
This circular provides guidance on common forms of financial arrangements available to
agency staff to achieve Australian Government policy objectives. To facilitate a
particular outcome, agency staff may decide to use a specific financial arrangement or a
combination of financial arrangements.
2.
In determining which financial arrangement to use, agency staff should focus on the
substantive purpose and characteristics of the financial arrangement and document the
reasons for using that particular financial arrangement. It is essential that agency staff
apply the relevant framework (i.e. policy, processes and legal requirements) that
establish the requirements different types of financial arrangements. It is also important
for agency staff to confirm that existing arrangements are properly characterised,
particularly following recent updates to the CPRs and CGGs.
3.
Before entering into any arrangement that may commit public money, you must be
satisfied that:

you have authority to enter into the arrangement

you have acted in accordance with the CPRs or CGGs, where relevant

the spending proposal has been approved under FMA Regulation 9 and, if required,
agreement obtained under FMA Regulation 10.
4.
The authority to enter into, vary or administer an arrangement generally comes from
legislation. The authority can come from section 32B of the FMA Act, section 44 of the
FMA Act, or other specific legislation. This authority is usually delegated to agency staff
to enable them to enter into, vary or administer an arrangement.
5.
Attachment B ‘Financial Arrangement Matrix’ and Attachment C ‘Decision Tree for
Financial Arrangements’ provide tools to assist agency staff to identify common financial
arrangements and determine which arrangement to use.
6.
Agency staff should contact the Department of Finance and Deregulation (Finance) if
they are unsure of which financial arrangement best suits their activity or program.
1.2 Grants
7.
From 1 June 2013, FMA Regulation 3A(1) defines a grant as an arrangement for the
provision of financial assistance by the Commonwealth:
(a) under which public money is to be paid to a recipient other than the Commonwealth
(b) which is intended to assist the recipient achieve its goals
(c) which is intended to help address one or more of the Australian Government’s policy
objectives
(d) under which the recipient may be required to act in accordance with specified terms
or conditions.
Finance Circular 2013/01
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Department of Finance and Deregulation
Part 1 – Grants, Procurements and other Financial Arrangements
8.
Where an arrangement meets the definition of a grant, then the CGGs apply.1 The CGGs
can be found on the Finance website at: http://www.finance.gov.au/financialframework/financial-management-policy-guidance/grants.html.
9.
A granting activity can take a variety of forms, including a payment made on a one-off or
ad hoc basis, payments made as a result of competitive assessment, or funding provided
specified criteria are satisfied. Agencies should apply the requirements and the
principles of CGGs according to the nature of the grant they are administering.
10.
Most grants do not relate to the ordinary services and functions of government and
require legislative authority in addition to an appropriation Act. The authority can be
established in portfolio legislation or by regulation. Many grants are authorised by
section 32B of the FMA Act and Schedule 1AA of the FMA Regulations. Agencies can
contact Governance Branch at LRB@finance.gov.au if you consider legislative authority
may be necessary in the FMA Regulations.
Gifts of public money
11.
A gift of public money is a grant. The CGGs apply to gifts of public money. Like all
payments of public money, a gift of public money must be a ‘proper use’ of
Commonwealth resources.
Benefit and entitlement payments, which are not established by legislation
12.
Where a benefit or entitlement payment is not established through legislation (other
than section 32B of the FMA Act, section 44 of the FMA Act, or an appropriation Act) it
should be treated as a grant and agency staff must comply with the CGGs.
Sponsorships
13.
Sponsorships, which provide financial assistance to individuals or organisations,
whether directly to a recipient or through a third party, will generally meet the
definition of a grant. However, a sponsorship may amount to procurement where it is
essentially acquiring a good or service, for example, purchasing advertising space.
Subsidies and rebates
14.
Subsidies and rebates can involve a wide range of arrangements, such as tax concessions
and entitlement payments. Subsidies and rebates which create an entitlement to
financial assistance will generally meet the definition of a grant where they are not
established by specific legislation. Where the authority to enter the arrangement comes
from section 32B of the FMA Act and Schedule1AA of the FMA Regulations the
arrangement will generally meet the definition a grant and the CGGs will apply to the
arrangement.
1.2.1
Arrangements not considered to be grants
15.
There are some financial arrangements that would normally be included in the definition
of a grant, but are not subject to the CGGs for policy reasons. FMA Regulation 3A(2)
provides that certain arrangements are excluded from the definition of a grant.
See Attachment A for the full list of exclusions in FMA Regulation 3A(2).
Note the term ‘discretionary grant’, which was commonly used prior to the introduction of the CGGs,
is no longer relevant in the FMA Regulations or the CGGs.
1
Finance Circular 2013/01
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Department of Finance and Deregulation
Part 1 – Grants, Procurements and other Financial Arrangements
16.
Generally, these arrangements are excluded because, although they may meet the
definition of a grant, they are subject to separate legislative or administrative
arrangements. For example, payments of financial assistance to States under section 96
of the Australian Constitution and payments made under the
Federal Financial Relations Act 2009 are governed by the Inter-Governmental Agreement
and therefore not subject to the FMA Regulations requirements applying to grants,
including the CGGs.2
17.
Similarly, Official Development Assistance (ODA), administered by AusAID, has its own
reporting, evaluation and transparency requirements that agencies must meet.
18.
Questions about the application of the CGGs should be directed to
grants@finance.gov.au.
1.3 Procurement
19.
Procurement encompasses the whole process of procuring goods and services. It begins
when a need has been identified and a decision has been made on the procurement
requirement. Procurement continues through the processes of risk assessment, seeking
and evaluating alternative solutions, the awarding of a contract, the delivery of and
payment for the goods and services and, where relevant, the ongoing management of the
contract and consideration of disposal of goods.
20.
In addition to the acquisition of goods and services by an agency for its own use,
procurement includes the acquisition of goods and services on behalf of another agency
or a third party.
21.
The CPRs are the core procurement policy framework and articulate the Government's
expectations of FMA Act agencies and relevant Commonwealth Authorities and
Companies Act 1997 bodies. The CPRs can be found on the Finance website at:
http://www.finance.gov.au/procurement/index.html.
Memberships
22.
Where the Commonwealth purchases a membership to a group, either for its own use,
use by agency staff, or the use of a third party, this will most likely constitute
procurement under the financial framework.
1.3.1
Arrangements not considered to be procurements
23.
There are some arrangements which are not considered to be procurements, despite
exhibiting the characteristics of procurement. Under paragraph 2.9 of the CPRs,
statutory appointments, appointments by ministers and the engagement of employees,
amongst other things, are not considered to be procurements.
24.
Questions about the application of the CPRs should be directed to
procurementagencyadvice@finance.gov.au.
Note that payments to States and Territories that are not made under section 96 of the Constitution
or the Federal Financial Relations Act 2009 may meet the definition of a grant and be subject to the
CGGs.
2
Finance Circular 2013/01
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Department of Finance and Deregulation
Part 1 – Grants, Procurements and other Financial Arrangements
1.4 Other financial arrangements
1.4.1
Act of grace payments
25.
The act of grace power under section 33 of the FMA Act allows the Finance Minister or
delegate to authorise one-off and periodic payments to individuals or other bodies (such
as companies), if he or she considers it appropriate because of special circumstances.3
1.4.2
Compensation payments
26.
Compensation payments include payments intended to compensate individuals or
groups for financial loss or other adverse consequences caused by a decision, action or
omission by the Australian Government. It also includes discretionary compensation
where the Australian Government is under no legal obligation to make a payment.
27.
Examples of compensation payments include: payments made under the Scheme for
Compensation for Detriment caused by Defective Administration (the CDDA Scheme) and
payments made under section 73 of the Public Service Act 1999.4
1.4.3
A payment to a person of a benefit or entitlement established by legislation
28.
An entitlement is a right to apply for, or claim, a benefit established by specific
legislation (other than section 32B of the FMA Act, section 44 of the FMA Act, or an
appropriation Act). The entitlement creates an obligation on the Australian Government
to provide the benefit if relevant criteria are satisfied and may or may not place
obligations on recipients of entitlements.
29.
Examples of entitlements that operate through specific legislation include: pension
payments made through the Social Security (Administration Act) 1999; payments to
veterans through the Veterans’ Entitlements Act 1986; and payments made under the
Pharmaceutical Benefits Scheme and Repatriation Pharmaceutical Benefits Scheme.
1.4.4
Tax concessions or offsets
30.
The Australian Taxation Office (ATO) administers legislation governing taxation. Any
agency implementing a financial arrangement that involves matters of taxation should
consult with the ATO in the first instance.
1.4.5
Investments
31.
An investment is an arrangement that involves the purchase of an asset by the
Commonwealth for the primary purpose of earning income or a profitable return. 5
32.
Investments are made under the authority of specific enabling legislation, such as the
Future Fund Act 2006 or section 39 of the FMA Act. However, as a general principle,
public money administered by FMA Act agencies should not be invested by them, as cash
and debt management is generally conducted at the whole-of-government level.
1.4.6
Loans
33.
A loan is an arrangement under which the Commonwealth advances a sum of public
money to an external recipient with the recipient agreeing to repay that sum (with or
without interest) on a future date or on demand.
See the Finance website for further guidance on act of grace payments .
See the Finance website for further guidance on compensation payments.
5
Finance Circular 2005/11: ‘Investment of public money - Section 39 of the FMA Act’ provides further
guidance on investments.
3
4
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Department of Finance and Deregulation
Part 1 – Grants, Procurements and other Financial Arrangements
34.
Loans are made for a variety of reasons, including policy purposes and as a means of
facilitating repayments to the Commonwealth. Unlike an investment, the primary
purpose of a loan is not to earn a commercial rate of return or profit for the
Commonwealth. While interest may be payable under a loan, it may not be at
commercial rates.
35.
An amount of money that is required to be repaid without interest or at a concessional
rate of interest should generally be considered a concessional loan, rather than a grant.
However, there may be cases where a concessional component of a loan could be
considered a grant (for example, as part of a granting activity or grant program design).
Agencies should consult with Finance if they are unsure whether the CGGs apply in
particular circumstances.
36.
Loan guarantees are neither loans nor grants. They are a contingent liability incurred by
the Commonwealth. FMA Regulation 11 must be complied with before entering into a
loan guarantee on behalf of the Commonwealth.
1.4.7
Gifts of public property
37.
A gift of public property involves the provision of public property to another party. Gifts
of public property are governed by section 43 of the FMA Act and must be a ‘proper use’
of Commonwealth resources.
Finance Circular 2013/01
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Department of Finance and Deregulation
Part 2 – Frequently Asked Questions
Part 2 - Frequently asked questions
Q1:
Our program is called a grant but is a legislative program. Which framework should we
apply?
What agency staff call a particular financial arrangement does not necessarily determine the
framework to apply. It is important that the substantive purpose of the financial arrangement is
established and then the relevant framework is applied accordingly. If the arrangement meets the
definition of a grant under FMA Regulation 3A(1), and is not included in the exceptions in
FMA Regulation 3A(2) (see Attachment A), then it is a grant for the purposes of the FMA
Regulations and the CGGs apply.
It is also important for agency staff to confirm that existing arrangements are properly
characterised following the update to the CGGs. The ‘Financial Arrangement Matrix’ at
Attachment B and the ‘Decision Tree for Financial Arrangements’ at Attachment C provide
further guidance to assist agency staff.
Q2:
How can I tell if I am undertaking procurement or a granting activity?
It can sometimes be difficult to distinguish grants and procurements depending on the
circumstances, particularly where procurement is on behalf of a third party. Often what
differentiates a grant from a procurement is that a grant recipient is being assisted by the
Commonwealth to achieve its own goals (consistent with Commonwealth goals), whereas in a
procurement, the Commonwealth is obtaining goods and/or services that will assist the
Commonwealth in achieving Commonwealth goals.
Q3:
How should I classify non-cash components of a grant?
A grant is the provision of financial assistance, the payment of public money, to a recipient
external to the Commonwealth. Where agency staff provide access to Commonwealth materials
and facilities as part of a grant agreement, there is no need to apply a separate financial
framework to that component of the grant.
Where agency staff acquires goods or services on behalf of the grant recipient, then this is
procurement and the CPRs apply for that component of the program. In providing goods or
services to the grant recipient, agency staff should consider if they are gifting public property
under section 43 of the FMA Act.
Q4:
Our chief executive wants to make a donation to a disaster appeal on behalf of our
department. How should I classify the payment?
A voluntary donation would most likely be a gift of public money and fall within the definition of a
grant in FMA Regulation 3A(1). The CGGs apply to gifts of public money. Like all payments of
public money, a gift of public money must be a ‘proper use’ of Commonwealth resources.
Q5:
How should I classify sponsorship payments?
Depending on the substantive purpose of the particular sponsorship arrangement, it will likely be
a grant or procurement. Most sponsorship arrangements for the provision of financial assistance
will meet the definition of a grant under FMA Regulation 3A(1) and must comply with the CGGs.
However, it is possible that some sponsorship arrangements will effectively amount to
procurement, for example, where the substantive purpose of the arrangement is to acquire
advertising space.
Finance Circular 2013/01
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Department of Finance and Deregulation
Part 2 – Frequently Asked Questions
Q6:
How should I classify ex gratia payments?
Ex gratia payments are essentially gifts of public money and fall within the definition of a grant in
FMA Regulation 3A(1). The CGGs apply to gifts of public money. Like all payments of public
money, a gift of public money must be a ‘proper use’ of Commonwealth resources.
Q7:
I am administering a grant to another government. Do I need to comply with the CGGs?
Payments to State and Territory governments made under section 96 of the Constitution or under
the Federal Financial Relations Act 2009, as well as payments to local government under the
Local Government (Financial Assistance) Act 1995, are excluded from the definition of a grant in
FMA Regulation 3A(2) and the CGGs do not apply. Similarly, grants to overseas governments that
are ODA are excluded from the definition of a grant in FMA Regulations 3A(2) and the CGGs do
not apply. However, the CGGs will apply to grants to other governments which are not specifically
covered by the exclusions in FMA Regulation 3A(2).
Q8:
Our agency is providing financial assistance to external recipients and the related
agreements require the recipient to pay interest as well as repay the financial assistance
in certain circumstances. Is this financial arrangement a grant?
If the arrangement meets the definition of a grant under FMA Regulation 3A(1), and is not
included in the exceptions in FMA Regulation 3A(2), then it is a grant for the purposes of the
FMA Regulations and the CGGs apply. Arrangements that require payments back to the
Commonwealth may be loans or investments. In determining whether the arrangement falls into
one of the exceptions in FMA Regulation 3A(2), agency staff should have regard to the substantive
purpose of the arrangement and document the reasons for adopting a particular approach.
Q9:
I am administering a program that provides cash rebates to people who have purchased
household hot water systems. How should I classify the payments?
Subsidies and rebates which create an entitlement to financial assistance will generally meet the
definition of a grant where they are not supported by specific legislation. Where the authority to
enter the arrangement comes from section 32B of the FMA Act and Schedule 1AA of the
FMA Regulations the payments will most likely meet the definition of a grant and the CGGs will
apply.
Q10:
How do I know if my arrangement needs legislative authority and how do I get
legislative authority if I need it?
As a result of the High Court decision in Williams, government spending activities that do not
relate to the ordinary services and functions of government require legislative authority in
addition to an appropriation. The Australian Government Solicitor provides advice on whether an
activity requires legislative authority. Legislative authority for grants can come from portfolio
legislation or Schedule 1AA of the FMA Regulations. Agencies can contact Governance Branch at
LRB@finance.gov.au regarding Schedule 1AA of the FMA Regulations.
Q11:
How should I determine whether a particular grant is ODA?
ODA is defined by the Organisation for Economic Co-operation and Development in its
Development Assistance Committee Statistical Reporting Directives, available on their website
http://www.oecd.org/. AusAID have responsibility for classifying payments as ODA. You should
contact AusAID at infoausaid@ausaid.gov.au with questions regarding ODA.
Q12:
Are there special conditions to take into account where a particular program may
involve payments to States, Territories and local governments?
Where funding is only available to States and Territories then it will likely fall under the Federal
Financial Relations legislation and will not be subject to the CGGs. However, where local
governments are also able to apply for funding, and the payments are a grant, then the payments
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Department of Finance and Deregulation
Part 2 – Frequently Asked Questions
to local governments will be subject to the CGGs. When designing your program, you should
consider whether recipients will be treated differently and seek to minimise any inconsistencies.
Finance Circular 2013/01
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Department of Finance and Deregulation
FMA Regulation 3A
Attachment A
FMA Regulation 3A
3A Meaning of grant
(1) In these regulations, a grant is an arrangement for the provision of financial assistance by
the Commonwealth:
(a)
under which public money is to be paid to a recipient other than the
Commonwealth; and
(b)
which is intended to assist the recipient achieve its goals; and
(c)
which is intended to help address one or more of the Australian Government’s
policy objectives; and
(d)
under which the recipient may be required to act in accordance with any specified
terms or conditions.
(2) However, the following arrangements are taken not to be grants:
(a)
the procurement of property or services by an agency, including the procurement
of the delivery of a service by a third party on behalf of an agency;
(b)
an act of grace payment approved under subsection 33 of the Act;
(c)
a payment of compensation made under:
i. an arrangement relating to defective administration; or
ii. an arrangement relating to employment compensation; or
iii. an arrangement established by legislation;
(d)
a payment to a person of a benefit or entitlement established by legislation;
(e)
a tax concession or offset;
(f)
an investment or loan;
(g)
financial assistance provided to a State in accordance with section 96 of the
Constitution;
(h)
a payment to a State or a Territory that is made for the purposes of the Federal
Financial Relations Act 2009, including the following:
i. General Revenue Assistance;
ii. Other General Revenue Assistance;
iii. National Specific Purpose Payments;
iv. National Partnership Payments;
(i)
a payment that is made for the purposes of the Local Government (Financial
Assistance) Act 1995;
(j)
a payment that is made for the purposes of the Schools Assistance Act 2008;
(k)
a payment that is made for the purposes of the Higher Education Support Act
2003;
(l)
a payment of assistance for the purposes of Australia’s international development
assistance program, which is treated by the Commonwealth as official
development assistance.
Note1: The Commonwealth has regard to the definition of official development assistance that the
OECD has set out in its DAC Statistical Reporting Directives, available on the OECD’s website.
Note 2: A gift of public property is not a grant as described in subregulation (1). Section 43 of the Act
provides for gifts of this kind.
Finance Circular 2013/01
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Department of Finance and Deregulation
Financial Arrangements Matrix
Attachment B
Financial Arrangements Matrix
Financial
Arrangement
Grant
Procurement
Gifts of public
property
Substantive Purpose
Criteria
Authority Required
Examples
Related Guidance
Public money paid to a recipient
other than the Commonwealth.
Intended to assist the recipient
achieve its goals.
Intended to promote one or more
of the Australian Government’s
policy objectives.
The recipient may be required to
act in accordance with specified
terms and conditions.
Grants that are not the ordinary
services and functions of government
will require either separate legislation
or will need to be included within a
program listed in Schedule 1AA of the
FMA Regulations.
Open competitive grants rounds.
Targeted and one-off grants.
Entitlements programs that are
not supported by their own
legislation.
Some sponsorships, subsidies and
rebates.
Gifts of public money.
Ex gratia payments.
Promote policy objectives
through the provision of
financial assistance with
or without conditions.
Commonwealth Grant
Guidelines.
Finance Circular
2013/02.
ANAO Better Practice
Guides.
Achieve policy objectives
through the acquisition of
goods and services for the
Commonwealth's own use
or for the use of third
parties.
The process of procuring goods
and/or services.
May be for the Commonwealth’s
own use or may be on behalf of
third parties.
Most procurement for an agency's
own use will be for the ordinary
services and functions of government
and will not require separate
legislative authority. However, a
procurement may require separate
legislative authority, where it is not for
the ordinary services and functions of
government, either through its own
legislation or through Schedule 1AA of
the FMA Regulations.
Procuring supplies and
equipment, consultancy services,
memberships, advertising and
travel.
Transfer of public
property to the recipient.
Gifts of property in the custody or
under the control of, or someone
acting on behalf of, the
Commonwealth.
Must either be expressly
authorised by law, have the written
approval of the Finance Minister or
the Commonwealth must have
acquired the property to use it as a
gift.
The power to make gifts of public
property is established under
section 43 of the FMA Act.
Gifts to visiting dignitaries.
Gifts of ex-government computers
to public schools.
Commonwealth
Procurement Rules.
Procurement website.
Financial Management
and Accountability
(Finance Minister to
Chief Executives)
Delegation 2010.
The Model Chief
Executive’s
Instructions.
Finance Circular 2013/01
Page 14 of 17
Department of Finance and Deregulation
Financial
Arrangement
Criteria
Authority Required
Examples
Related Guidance
To compensate individuals or
groups for financial losses or
other adverse consequences
caused by a decision, action
or omission on the part of
the Commonwealth.
The criteria for a particular
compensation payment will be set
out in either its enabling legislation
or the Scheme for Compensation
for Detriment caused by Defective
Administration (CDDA Scheme).
Payments made as part of the
CDDA Scheme will likely fall
within the ordinary services and
functions of government and not
require separate legislative
authority.
Other compensation payment
schemes will require their own
legislation.
Payment in accordance with the
CDDA Scheme.
Payments made under section 73
of the Public Service Act 1999.
Payments for the settlement of
legal liability claims made in
accordance with agency obligations
under the Legal Services Directions.
Finance Circular
2009/09.
Benefit and
entitlement
payments
established by
legislation
To provide a benefit to
individuals or groups that
meet specified criteria as
established by legislation.
An entitlement is a right to a
particular payment established in
legislation and generally involves
no obligation on the recipient to
spend the proceeds for any
particular purpose, or to
subsequently account for or acquit
the expenditure.
Entitlements established by
legislation must be supported by
their own legislation.
Examples of entitlements
established in legislation include
pension payments made through
the Social Security (Administration
Act) 1999, payments to veterans
through the Veterans' Entitlement
Act 1986.
Finance Circular
2013/01.
Tax concession
or offset
Achieve policy objectives by
directly reducing the amount
of tax an individual or other
bodies must pay.
Specific categories of tax
concessions and offsets are
contained in the various pieces of
taxation legislation administered
by the Australian Taxation Office.
All taxation legislation
administered by the Australian
Taxation Office.
Fuel excise rebate.
Australian Taxation
Office.
Compensation
payments
Substantive Purpose
Finance Circular 2013/01
Page 15 of 17
Department of Finance and Deregulation
Financial
Arrangement
Substantive Purpose
Criteria
Authority Required
Examples
Related Guidance
Investments
Earning income or a profitable
return for the Commonwealth.
An investment is an arrangement
that involves the purchase of an
asset by the Commonwealth for
the primary purpose of earning
income or a profitable return for
the Commonwealth.
Investments are made under the
authority of specific enabling
legislation or section 39 of the
FMA Act.
Investments made under the
Future Fund Act 1996.
Finance Circular
2005/11.
Loans
May be made for a variety of
reasons, including policy
purposes and as a means of
facilitating repayments to the
Commonwealth. However,
the primary purpose of a loan
is not to earn a commercial
rate of return or profit for the
Commonwealth.
An arrangement under which the
Commonwealth advances a sum of
public money to an external
recipient with the recipient
agreeing to repay that sum (with or
without interest) on a future date
or on demand. While interest may
be payable under a loan, it may not
be at commercial rates.
Loans that are not the ordinary
services of government will
require either separate legislation
or will need to be included within
a program listed in Schedule 1AA
of the FMA Regulations.
Concessional loans.
Finance Circular
2013/01.
Act of grace
payment
To provide financial relief to
individuals or other bodies
where there is a moral rather
than a legal obligation on the
Commonwealth and there are
no other means of redress.
A discretionary power of the
Finance Minister or delegate to
make payments on behalf of
individuals or other bodies due to
special circumstances.
The power to make act of grace
payments is established under
section 33 of the FMA Act.
Cases where legislative and
administrative provisions do not
take sufficient account of the
special circumstances of individual
cases.
Finance Circular
2009/09.
Finance Circular 2013/01
Page 16 of 17
Department of Finance and Deregulation
Decision Tree for Financial Arrangements
Attachment C
Decision Tree for Financial Arrangements
Are you providing financial assistance under the Federal Financial Relations Act 2009,
Section 96 of the Constitution, the Local Government (Financial Assistance) Act 1995,
the Schools Assistance Act 2008 or the Higher Education Support Act 2003?
NO
Will you be purchasing goods or services for your agency’s own use?
YES. The arrangement is not subject to the Commonwealth
Grant Guidelines. However, other financial assistance to the
States, Territories, local government or educational
institutions may be subject to the Commonwealth Grant
Guidelines.
YES. The arrangement is considered Procurement.
See the Commonwealth Procurement Rules.
NO
Will you be purchasing goods or services on behalf of a third party?
NO
Does the arrangement require the recipient to pay interest to the Australian
Government?
NO
Will you be required to make the payment, provided relevant criteria in legislation are
satisfied?
YES. The arrangement is considered Procurement.
See the Commonwealth Procurement Rules.
YES. The arrangement is likely considered an
Investment or a Loan, particularly if the primary
purpose is to earn a profitable return or the principal
must be repaid.
YES. The arrangement is likely considered an Entitlement
or Benefit Payment in legislation.
Refer to the relevant legislation.
NO
Will you be compensating the recipient for loss caused by an act or omission of the
Australian Government?
NO
Will you be providing financial assistance to a recipient to achieve its goals and the
policy objectives of the Australian Government?
YES. The arrangement is considered a payment of
compensation. Refer to the relevant legislation or the
Scheme for Compensation for Detriment caused by
Defective Administration.
YES. The arrangement is likely considered a Grant and
subject to the Commonwealth Grant Guidelines.
Finance Circular 2013/01
Page 17 of 17
Department of Finance and Deregulation